Technology-focused expansion is the primary driver of M&A activity among startups, according to a recent study. In this literature review, we examine the paper, which uses data from Crunchbase to identify patterns of startup M&A activity and highlight the common reasons for such activity.

LITERATURE

This literature review is primarily focused on summarising Identifying Patterns of Mergers and Acquisitions in Startup: An Empirical Analysis Using Crunchbase Data published by Yebin Lee and Youngjung Geum at IEEE Access.

QUICK VIEW

• The authors use M&A transaction data and company information from Crunchbase to inform their analysis.
• They create their own taxonomy to assess and understand the factors that influence M&A in startups. Using 23.6k transaction records and 64k company records, the authors perform an analysis of variance (ANOVA) test to compare the characteristics.
• Separated into five M&A “clusters”, the authors find that companies with a large employee count and popularity but low technological capability are often acquired by companies with a high technological capability and greater access to financing.

Ultimately, the authors conclude that technology-focused expansion is the primary driver of M&A activity. Additionally, they find the most active companies pursuing M&A for technological expansion are those in the information and communications technology, electronics, biotechnology and pharmaceutical sectors.